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Pizza Hut Q1 earnings show Brazil a healthy market
May 17, 2010
Though Pizza Hut parent Yum! Brands reported a mixed bag of Q1 earnings stateside, the Brazilian franchisee is reporting robust sales and comp increases for the corresponding period, ending March 31, 2010.
Brazil is becoming a haven for American pizza companies. In April, Sbarro's president, Peter Beaudrault, announced he would open the first of 1,000 stores there in the second half of this year.
The outlook for the Brazilian economy remains positive, according to a release from Brazil Fast Food Corp., the Pizza Hut franchisee in the South American nation and the second largest restaurant chain with 737 points of sale, operating the Bob's brand, KFC and Pizza Hut São Paulo as franchisee of Yum! Brands. As a result, the company maintains its goal to end 2010 with 830 points of sale, up from 673 in 2009.
During the first quarter, the macro-economic environment in Brazil was favorable for retail activities in general, but to a lesser extent for the food segment, said CEO Ricardo Figueiredo Bomeny. Notwithstanding, the company delivered solid results driven by the strength of its industry leading brands.
Highlights include same own-store sales up 14.5 percent for Pizza Hut. Net income was $1.9 million reais (US $1.1 million), up from $1.1 million reais (US $609,857) last year, a 73 percent increase. Revenue totaled $50.1 million reais (US $28 million), up 13.4 percent from the $44.2 million reais (US $24 million) of the first quarter 2009.
National Restaurant Consultants' CEO Kevin Moll isn't surprised at the healthy numbers in the foreign market – according to him, they're part of a larger trend, for this brand especially.
"When a U.S. brand enters a foreign market (like Taco Bell recently did in India), those locations get swamped with business," he said. "Yum! Brands has seen this happen many times over the years and their international brands are the strongest in any portfolio."
The bouyant market also pushed up operating expenses for the brand, whose operating costs were up 12.9 percent to $47.8 million reais (US $27 million), driven by higher owned-store costs associated with increases in store rent and wages, higher franchisee costs associated with the growth in the number of franchised network stores, higher administrative costs driven by new staff hires, outsourcing services transition costs, legal expenses to adapt franchisee agreements and, in general, structure expenses to keep on preparing the group for the expansion of the stores of the operating brands.
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